California Backs Away From Gas Deregulation
After almost 18 months of detailed proceedings and negative
legislative signals, California regulators have pulled back
substantially from original proposals to unbundle the state's
natural gas industry along the lines of the state's electric
The latest proposal endorsed by an administrative law judge and
the president of the California Public Utilities Commission would
include a default level of bundled monopoly utility service, while
giving the utilities and other stakeholders an opportunity to reach
a settlement this summer on what services eventually should be
recommended to the state legislature for unbundling. The latest
scenario will be considered by the CPUC at its June 24 meeting in
The most far-reaching among proposals surfacing in early 1998
already have been taken out of consideration. Those include: the
divestiture of transmission and storage by California's two
dominant gas utilities, Pacific Gas and Electric and Southern
California Gas; establishment of an "independent system operator"
of the gas transmission pipeline system within the state; and
unbundling of the metering function.
There is continuing pressure for more transparency in the
wholesale gas market in California, particularly aimed at SoCalGas'
operating system for transmission and storage, which came under
criticism from many parties in the ongoing statewide gas case as
being closed and anti-competitive.
"Essentially the proposed decision outlines a market structure
that tries to do two things at once," according to a CPUC staff
adviser closely involved in the gas restructuring case. "It
recognizes the benefits of allowing the utility to continue to
provide the same array of bundled services (procurement,
transmission, storage, revenue cycle services, etc.) and at the
same time, it really strives to introduce as many competitive
elements into that structure, recognizing that the potential for
anti-competitive behavior will still exist because the utility is
still able to provide fully bundled service.
"It offers some ways to mitigate the latter, however, through
provisions such as increased information disclosure, the utilities
providing more information on their operations, etc., trying to
provide a more transparent market. This is supposed to mitigate any
potential for the utilities' distorting the marketplace."
By the end of the year, the CPUC wants to send a formal written
report and recommendations to the state legislature, based on a
settlement, hearings or a combination of the two.
In the meantime, the proposed decision would attempt to gain
early action from the state legislature on consumer protection
plans and a lifting of the barriers to more small residential and
business (core) customers choosing to aggregate their gas-buying
and related services. In addition, SoCalGas will be asked to
provide clarification on its existing use of "windows" for setting
capacity rights and rates in its transmission and storage system.
Richard Nemec, Los Angeles
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